Potential in Alabama Economy Still Waiting to Be Unleashed with ABCI at 45.4

Alabama business confidence fell 2.9 points to 45.4 for its third consecutive quarterly decline.

Economic activity is not
likely to pick up statewide in the first quarter of 2013. That's the consensus of almost 300 Alabama business
executives who completed the first quarter 2013 Alabama Business Confidence Index™ (ABCI) survey during the first
two weeks of December. The ABCI is a
project of the Center for Business and Economic Research (CBER) at The
University of Alabama. This marks 45
consecutive quarters that CBER has surveyed business confidence across the state.

Alabama business confidence fell 2.9 points to 45.4 for
its third consecutive quarterly decline.
Pessimism about how the U.S.
economy will perform in the first quarter weighed heavily on the expectations
of business executives. Outlooks for the
state and for industry profits, hiring, and capital expenditures are also below
the neutral level of 50 this quarter. Only
sales are expected to increase compared to fourth quarter levels. Alabama
business executives are certainly more cautious than a year ago when the ABCI
registered 50.8 and panelists were optimistic that the state's economy and
business activity would pick up modestly.

The lack of progress toward
resolving issues about taxes, budgets, and the debt ceiling by the time the
ABCI survey closed in mid-December likely influenced sentiment about the
performance of the U.S.
economy for the first quarter of 2013.
The national economy index fell 4.2 points to 38.4. Fifty-three percent of panelists expect U.S. economic
growth to be worse than last quarter.

Business executives across
the state are also less optimistic about how Alabama's economy will fare this
quarter. At 46.7 the index indicates a
modest slowdown from fourth quarter 2012.
Almost 39 percent of respondents forecast a worse economy, but more than
61 percent think the state's economic growth will be flat or improving. New industries and expansions will likely
boost optimism later in 2013 as national fiscal issues are resolved.

Sales are expected to
increase slightly in the first quarter of 2013.
The sales component index registered 50.4, with 36.2 percent of survey
respondents expecting an increase this quarter versus 33.1 percent anticipating
a decrease in sales. Sales could be
moderately higher in construction; finance, insurance, and real estate; and
transportation, information, and utilities. Profits are generally expected to trend lower,
with the index down 0.9 points to 47.7.
However, firms in financial activities and in wholesale trade expect at
least modestly higher earnings.

Alabama businesses will likely be even more cautious this
quarter about adding jobs or making capital investments. With the hiring index down 3.0 points to 45.7,
job growth is expected to slow early in 2013.
Construction is the only industry expecting hiring to pick up. The state could see a marked decline in
capital spending overall; the component index of 43.6 is 5.3 points below its
fourth quarter reading.

The Birmingham-Hoover area is
the bright spot among the first quarter 2013 metro outlooks. Confidence rose one point to 50.7, with
industry sales, profits, and hiring all expected to improve. Mobile
also expects stronger sales and hiring, with an ABCI of 48.7. However, executives in the Huntsville
and Montgomery
metro areas are pessimistic on all fronts, with very weak outlooks for the
economic environment and all industry indicators below 50. Huntsville's
ABCI came in at 40.4, while Montgomery
recorded 44.3.

The confidence index rose
1.4 points to 49.4 among firms that employ 100 or more; these businesses expect
sales and profits to increase this quarter.
But the ABCI index for both small and midsize businesses is just above
43, with every indicator below 50.

REPORT: Full results of the first
quarter 2013 ABCI are available at http://cber.cba.ua.edu/ABCI. The survey was completed online December 1-15
by 287 Alabama
business executives.